Yesterday, NDP leadership candidate and environmental hawk Thomas Mulcair announced his intention to implement a, “new comprehensive plan to combat climate change.” According to his press release, “Mulcair’s new plan would still be industry-focused and based on the principle that ‘polluters pay’, but it would expand beyond the 700 largest emitters in Canada to cover all major sources of climate change pollution.” Want to understand what this means? Here are three questions you should ask – Who’s covered? What’s the cap? Who gets the permits?

Broader coverage sounds promising – Canada’s GHG emissions are not as concentrated among large, industrial sources as most people think. In fact, if you look at the 500 or so largest industrial emitters in Canada, those emitting more than 50,000 tons of CO2 equivalent GHGs per year, they account for about 250Mt of annual emissions. Canada’s total GHG emissions in the same year (2009) were 690 Mt, so the direct emissions from the largest industrial facilities account for a little over 35% the Canadian total.

So, the first question I have for Mr. Mulcair is who will be covered by the cap?

Mr. Mulcair’s press release provides some clarity as to where he might and might not be looking. He states that, “while we can’t expect individuals, family farmers and small businesses to pay the price for cleaning up a mess they didn’t create, we can no longer afford to focus only on the worst of the worst.” So, does this mean that his policy will extend to downstream emissions? That would be an important policy change, if so, but it doesn’t sound like it. Some of Canada’s major sources of emissions fall into the categories Mr. Mulcair mentioned – agriculture (74Mt/yr), buildings (80Mt/yr), transportation (164Mt/yr), and waste (54Mt/yr) account for over half of Canadian GHGs. Also, we can’t neglect to mention the fact that most of the industrial emissions associated with the production of electricity (126 Mt) and oil and gas (153 Mt) are for production which serves domestic consumption, not exports.

If Mr. Mulcair is truly talking about a system in which the downstream emissions associated with fossil fuels used to heat buildings, propel cars and trucks, and run tractors, then he might be on to something. So, Mr. Mulcair, how far beyond the worst of the worst are you prepared to go?

Now, suppose you’re driving along and your passenger says, “there’s a speed limit on this road!” What’s your next question? The second question I have for Mr. Mulcair is with regard to stringency. If Mr. Mulcair is looking to cap Canadian emissions at levels previously pursued in NDP-supported policies, he should say so. Once we know which emissions are covered and what the cap is, then we can judge whether the policy will have meaningful impacts on our national emissions. Without that, it’s as useful as your passenger telling you the road has a speed limit. It’s easy to say you’ll have a cap on emissions, but it’s crucial to know what that cap is. Over to you, Mr. Mulcair.

Finally, since a cap-and-trade program, like any system of supply management, creates valuable assets in the form of emissions rights, we should ask, “who gets the permits and how?” Emissions permits in cap-and-trade systems might be auctioned, but more often they are mostly allocated on the basis of historical emissions, current output, or other metrics. The distribution of either the permits themselves or the revenues from auctioning them is a crucial element we need to know to analyze this policy. Economic analysis done by Mark Jaccard and Associates for the Pembina Institute and the David Suzuki Foundation on the type of stringent targets often advocated for by NDP members (on the order of 25-40% below 1990 levels by 2020) showed that, “the revenue from carbon pricing would be more than $70 billion per year by 2020.” (see page 8 ) If you simply allocate the permits, you’re not distributing any less value, you’re simply doing so in a less transparent manner than an auction-and-redistribute. So, Mr. Mulcair, who gets the money that the polluters will pay under your plan?

6 responses to “Some clarification please, Mr. Mulcair.”

In short, NDP supporters and Canadians should ask for more details on Mr. Mulcair’s cap

Nope, for this NDP supporter Mulcair has presented enough information on the direction he’ll follow on this issue as leader to enable me to make a selection. As for non NDP supporters they don’t really need to know diddly unless Mulcair actually does become leader and the party decides to proceed in this direction. And that would only likely be presented in the lead up to or during the next election.

I’m sorry, but I find that disappointing. Directionally, he’s told you about the policy tool, but no specifics about who would be covered or at what stringency. If you can find a YouTube video of his first speech as QC Enviro Minister, it’s a great contrast. Here’s what we’re going to do, here’s how we’re going to do it, here’s who’s affected and why they better take notice right now. He was really effective as QC enviro min, so I would have liked to see more of that from him, rather than the populist push on abstract “big industry” and nothing on the other 65% of emissions.

Of course he was more specific as QC enviro minister. He had the full resources of his party and the government to craft a plan. But this is a leadership contest and the candidates don’t have access to those resources nor should they be expected to when 8 out of the 9 plans presented will go into the dumpster.

True enough. He’s being quite precise on some details though, and not on others. I think the basics of what the cap would be and who would be affected should matter. Also, with respect to your previous comment, it’s clear that the current race is about capturing the NDP member votes, but the real deal is 4 years down the road, is it not? At that point, the question becomes whether the candidate can leverage support among those who aren’t currently card-holding members of the NDP. A leadership race would seem like an opportunity to build some of that support, would it not?

Great blog Andrew. The teaching point I will add for my class is that it raises the regional emissions issue that Canada has. For example, when I helped on the design of the emitters program for Alberta it made sense to go after the LFE since about 100 of them covered 75% of the province’s emissions. Thus our program made sense to target the LFEs from a reduction and transactional costs points of view. However, BC has a very different mix of emitters (mostly non-point)so their approach needed to be different.

From the New Zealand experience where we have a very ineffective emissions trading scheme, I agree entirely with your three questions. I would add a fourth question – what will be the rules on ‘linkage’ (buying and selling to/from) international carbon markets?
The NZETS allows unlimited importing of certified emissions units. In combination with other design features (delayed entry, partial obligations, no cap, output-intensity free allocation) this means the international price sets the domestic price. So allocation decisions become decoupled from issues of price, liquidity and scarcity. Its a rent-seekers delight.